What happened

Shares of Meta Platforms (META -0.52%) slipped on Wednesday, falling as much as 3.9%. As of 11:44 a.m. ET, the stock was still down 3.3%.

The general market downdraft no doubt contributed to the decline, but the catalyst that sent the social media titan lower was likely a lawsuit filed by an activist investor.

So what

James McRitchie, a shareholder activist, has filed a lawsuit alleging that Meta and its leadership have pursued profits at the exclusion of all else, suggesting that the company's "outdated" attitude has disregarded the "high costs that Meta imposes on society and the economy." 

The lawsuit, which is seeking class action status, alleges that Meta Platforms has disregarded numerous "red flags" and ignored shareholder proposals regarding the harmful impact of its business and its failure to update the company's corporate governance policies.

McRitchie is the publisher of CorpGov.Net, a popular site focused on matters of corporate governance.

Now what

This is just the latest in a long line of legal headaches for Meta Platforms. The company just recently agreed to pay $37.5 million to settle a lawsuit that alleged that Facebook violated user privacy rights by tracking their movements via their smartphones without permission. 

Meta is also facing financial challenges. In the second quarter, revenue declined by 1% year over year, the first such decline in the company's history. Several factors led to the slump, including foreign currency headwinds, a sequential decline in monthly active users, and macroeconomic conditions, which are pressuring the company's digital advertising business -- which is responsible for the lion's share of its revenue. These matters are likely more pressing concerns for shareholders. 

While it's understandable that investors might flinch at the prospect of another lawsuit, it's unlikely that the case will have a material impact on Meta's business. In Q2, the company generated $28.8 billion in revenue and strong free cash flow. That, combined with its strong network effect resulting from billions of users, should allay any short-term investor concerns.